Gold Continues to Trade with Risk-On Market Sentiment

Gold prices continue to erode as market sentiment continues to favor risk-on investments. U.S. equities continue to gain ground moving to new all-time record highs and leaving the precious yellow metal behind.

Market participants are awaiting the start of this month’s FOMC meeting which is scheduled to get underway tomorrow and conclude Wednesday afternoon. It is widely anticipated that the Fed will announce a rate hike. In fact, according to the CME’s FedWatch tool, the probability of a rate hike currently sits at 90.2%.

It is for that reason that is also widely believed that an interest rate hike this month has already been factored into current market pricing. On Wednesday afternoon Janet Yellen will hold her final press conference immediately following a statement released by the FOMC.

This week’s FOMC meeting will also coincide with meetings in both the ECB and the Bank of England.

There is also the real probability that tax reform legislation will be enacted. It is the high probability of tax legislation that has been fueling the U.S. equities rally which continues to be in full swing.

The current rise in Bitcoin value, along with Bitcoin futures which began trading on the CBOE last night, has been a viable outlet for traders searching for volatility. Bitcoin futures surged past $18,000 in active trading on the CBOE’s on its first day of trading. To what extent demand for cryptocurrencies are reducing the demand for the precious metals is not known, but liquidity has most certainly moved from gold and silver to the digital currencies.

As of 4:00 PM Eastern standard time, most active February futures are currently trading down $4.00 at $1244.60. Spot gold is trading at $1242.30, down $5.90 for the day. On closer inspection, today’s decline is the net result of selling in the market which accounts for $5.80 with $0.10 due to a strengthening US dollar, according to the Kitco Gold Index (KGX).

With the Dow and the S&P 500 closing at a new record high, the risk-on market sentiment continues to grow and continues to put pressure on safe haven assets such as gold and silver.

Wishing you as always, good trading,